These are tricky times in the stock market, so it pays to look to the best stock-fund managers for guidance on how to behave now. Veteran value investor Bill Nygren belongs in this camp, because the Oakmark Fund OAKMX he co-manages consistently and substantially outperforms its peers.
That isn’t easy, considering how many fund managers fail to do so. Nygren’s fund beats its Morningstar large-cap value index and category by more than four percentage points annualized over the past three years. It also outperforms at five and…
Even during a year in which the S&P 500 index declined 19%, with 72% of its stocks in the red, there were plenty of winners.
Before showing you the list of the best performers in the benchmark index, let’s look at a preview: Here’s how the 11 sectors of the S&P 500 SPX, -0.25%
performed for the year:
Index
2022 price change
Forward P/E
Forward P/E as of Dec. 31, 2021
Energy
59.0%
9.7
11.1
Utilities
-1.4%
18.9
20.4
Consumer Staples
-3.2%
21.0
21.8
Health Care
-3.6%
17.6
17.2
Industrials
-7.1%
18.3
20.8
Financials
-12.4%
11.9
14.6
Materials
-14.1%
15.8
16.6
Real Estate
-28.4%
16.5
24.2
Information Technology
-28.9%
20.1
28.1
Consumer Discretionary
-37.6%
21.3
33.2
Communication Services
-40.4%
14.3
20.8
S&P 500
-19.4%
16.8
21.4
Source: FactSet
Maybe you aren’t surprised to see that the energy sector was the only one to increase during 2022. But it might surprise you to see that despite the sector’s weighted price increase of 59%, its forward price-to-earnings ratio declined and remains very low relative to all other sectors.
It might also surprise you that West Texas Intermediate crude oil CL.1, +2.69%
gave up most of its gains from earlier in the year:
FactSet
The reason investors are still confident in energy stocks is that oil producers have remained cautious when it comes to capital spending. They don’t want to increase supply enough to cause prices to crash, as they did in the run-up to the summer of 2014, after which prices fell steadily through early 2016, causing bankruptcies and consolidation in the industry.
Now the oil companies are focusing on maintaining supply, raising dividends and buying back shares, as Occidental Petroleum Corp.’s OXY, +1.14%
chief executive explained in a recent interview with Matt Peterson. Click here for more about Occidental and the long-term supply/demand outlook for oil.
Best-performing S&P 500 stocks of 2022
Here are the 20 stocks in the benchmark index that rose most during 2022, excluding dividends. Proving that there are always exceptions, not all of them are in the energy sector.
Harris Kupperman, the president of Praetorian Capital, made a couple of interesting calls heading into 2022. He predicted that stocks of the giant tech-oriented companies that led the bull market would be sold off, and that oil prices would continue to rise through the end of 2022.
The first prediction came true, while the second one for oil prices fizzled. After rising to $130 in March, oil prices have fallen back to where they started the year. Then again, that second prediction still could have made you a lot of money because the share prices of oil companies kept rising anyway.
That leads to a new prediction for 2023 and a related stock screen below.
Here’s a chart showing the movement of front-month contract prices for West Texas Intermediate (WTI) crude oil CL.1, -0.62%
since the end of 2021:
FactSet
Even though Kupperman didn’t get his oil price call right, the energy sector of the S&P 500 SPX, -1.20%
was up 60% for 2022 through Dec. 27, excluding dividends. That is the only one of the 11 S&P 500 sectors to show a gain in 2022. And the energy sector is also cheapest relative to earnings expectations, with a forward price-to-earnings ratio of 9.8, compared with 16.7 for the full S&P 500.
WTI pulled back from its momentary peak at $130.50 in early March, but that didn’t reverse the long-term trend of low capital spending by oil and natural gas producers, which has given investors confidence that supplies will remain tight.
Vicki Hollub, the CEO of Occidental Petroleum Corp. OXY, -3.50%
— the best-performing S&P 500 stock of 2022 — said during a recent interview that there was “no pressure to increase production right now,” citing a $40 per barrel break-even point for oil prices.
At the end of November, these 20 oil companies stood out as reasonable plays for 2023 based on expectations for free-cash-flow generation and dividend payments.
For this next screen, we are only looking at ratings and consensus price targets among analysts polled by FactSet.
There are 23 energy stocks in the S&P 500, and you can invest in that group easily by purchasing shares of the Energy Select SPDR ETF XLE, -2.24%.
We can expand the list of large-cap names by looking at the components of the iShares Global Energy ETF IXC, -1.91%,
which holds all the energy stocks in the S&P 500 plus large players based outside the U.S.
Prices on the tables in this article are in local currencies.
IXC holds 51 stocks. To expand the list for a stock screen, we added the energy stocks in the S&P 400 Mid Cap Index MID, -1.24%
and the S&P Small Cap 600 Index SML, -1.89%
to bring the list up to 91 companies, which we then pared to 83 covered by at least five analysts polled by FactSet.
Here are the 20 companies in the list with at least 75% “buy” or equivalent ratings that have the most upside potential over the next 12 months, based on consensus price targets:
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Income-seeking investors are looking at an opportunity to scoop up shares of real estate investment trusts. Stocks in that asset class have become more attractive as prices have fallen and cash flow is improving.
Below is a broad screen of REITs that have high dividend yields and are also expected to generate enough excess cash in 2023 to enable increases in dividend payouts.
REIT prices may turn a corner in 2023
REITs distribute most of their income to shareholders to maintain their tax-advantaged status. But the group is cyclical, with pressure on share prices when interest rates rise, as they have this year at an unprecedented scale. A slowing growth rate for the group may have also placed a drag on the stocks.
And now, with talk that the Federal Reserve may begin to temper its cycle of interest-rate increases, we may be nearing the time when REIT prices rise in anticipation of an eventual decline in interest rates. The market always looks ahead, which means long-term investors who have been waiting on the sidelines to buy higher-yielding income-oriented investments may have to make a move soon.
During an interview on Nov 28, James Bullard, president of the Federal Reserve Bank of St. Louis and a member of the Federal Open Market Committee, discussed the central bank’s cycle of interest-rate increases meant to reduce inflation.
When asked about the potential timing of the Fed’s “terminal rate” (the peak federal funds rate for this cycle), Bullard said: “Generally speaking, I have advocated that sooner is better, that you do want to get to the right level of the policy rate for the current data and the current situation.”
Fed’s Bullard says in MarketWatch interview that markets are underpricing the chance of still-higher rates
In August we published this guide to investing in REITs for income. Since the data for that article was pulled on Aug. 24, the S&P 500 SPX, -0.29%
has declined 4% (despite a 10% rally from its 2022 closing low on Oct. 12), but the benchmark index’s real estate sector has declined 13%.
REITs can be placed broadly into two categories. Mortgage REITs lend money to commercial or residential borrowers and/or invest in mortgage-backed securities, while equity REITs own property and lease it out.
The pressure on share prices can be greater for mortgage REITs, because the mortgage-lending business slows as interest rates rise. In this article we are focusing on equity REITs.
Industry numbers
The National Association of Real Estate Investment Trusts (Nareit) reported that third-quarter funds from operations (FFO) for U.S.-listed equity REITs were up 14% from a year earlier. To put that number in context, the year-over-year growth rate of quarterly FFO has been slowing — it was 35% a year ago. And the third-quarter FFO increase compares to a 23% increase in earnings per share for the S&P 500 from a year earlier, according to FactSet.
The NAREIT report breaks out numbers for 12 categories of equity REITs, and there is great variance in the growth numbers, as you can see here.
FFO is a non-GAAP measure that is commonly used to gauge REITs’ capacity for paying dividends. It adds amortization and depreciation (noncash items) back to earnings, while excluding gains on the sale of property. Adjusted funds from operations (AFFO) goes further, netting out expected capital expenditures to maintain the quality of property investments.
The slowing FFO growth numbers point to the importance of looking at REITs individually, to see if expected cash flow is sufficient to cover dividend payments.
Screen of high-yielding equity REITs
For 2022 through Nov. 28, the S&P 500 has declined 17%, while the real estate sector has fallen 27%, excluding dividends.
Over the very long term, through interest-rate cycles and the liquidity-driven bull market that ended this year, equity REITs have fared well, with an average annual return of 9.3% for 20 years, compared to an average return of 9.6% for the S&P 500, both with dividends reinvested, according to FactSet.
This performance might surprise some investors, when considering the REITs’ income focus and the S&P 500’s heavy weighting for rapidly growing technology companies.
For a broad screen of equity REITs, we began with the Russell 3000 Index RUA, -0.04%,
which represents 98% of U.S. companies by market capitalization.
We then narrowed the list to 119 equity REITs that are followed by at least five analysts covered by FactSet for which AFFO estimates are available.
If we divide the expected 2023 AFFO by the current share price, we have an estimated AFFO yield, which can be compared with the current dividend yield to see if there is expected “headroom” for dividend increases.
For example, if we look at Vornado Realty Trust VNO, +1.03%,
the current dividend yield is 8.56%. Based on the consensus 2023 AFFO estimate among analysts polled by FactSet, the expected AFFO yield is only 7.25%. This doesn’t mean that Vornado will cut its dividend and it doesn’t even mean the company won’t raise its payout next year. But it might make it less likely to do so.
Among the 119 equity REITs, 104 have expected 2023 AFFO headroom of at least 1.00%.
Here are the 20 equity REITs from our screen with the highest current dividend yields that have at least 1% expected AFFO headroom:
Click on the tickers for more about each company. You should read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.
The list includes each REIT’s main property investment type. However, many REITs are highly diversified. The simplified categories on the table may not cover all of their investment properties.
Knowing what a REIT invests in is part of the research you should do on your own before buying any individual stock. For arbitrary examples, some investors may wish to steer clear of exposure to certain areas of retail or hotels, or they may favor health-care properties.
Largest REITs
Several of the REITs that passed the screen have relatively small market capitalizations. You might be curious to see how the most widely held REITs fared in the screen. So here’s another list of the 20 largest U.S. REITs among the 119 that passed the first cut, sorted by market cap as of Nov. 28:
U.S. stocks closed higher Tuesday, but off the session’s best levels, after more data suggested inflation may be slowing and mega-retailer Walmart offered a rosier annual forecast.
The Dow turned negative earlier in the session after the Associated Press reported that Russian missiles crossed into Poland and killed two people, ratcheting up geopolitical tension given Poland is a NATO country.
How stocks traded
S&P 500 index SPX, +0.87%
rose 34.48 points, or 0.9%, to close at 3,991.73.
Dow Jones Industrial Average DJIA, +0.17%
climbed 56.22 points, or 0.2%, ending at 33,592.92, after touching a nearly three-month high of 33,987.06 earlier.
Nasdaq Composite COMP, +1.45%
climbed 162.19 points, or 1.5%, closing at 11,358.41.
On Monday, U.S. stocks finished near session lows after early gains evaporated. The Dow Jones Industrial Average fell 211 points, or 0.6%, while the S&P 500 declined 36 points, or 0.9% and the Nasdaq Composite dropped 226 points, or 2%.
What drove markets
U.S. stocks closed higher Tuesday, after another batch of inflation data showed that whole prices rises were slowing in October for the second straight month.
The Dow’s brief negative turn came after reports that Russian military bombarded Ukraine Tuesday. In the attack, missiles reportedly crossed into Poland, a member of NATO, the Associated Press said, citing a senior U.S. intelligence official.
“Geopolitical concerns obviously are never positive for the market,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
On Tuesday, oil futures settled higher. West Texas Intermediate crude for December delivery rose to $1.05, or 1.2%, reaching $86.92 a barrel.
While markets had started to price in the toll of Russian’s nearly nine-month invasion of Ukraine, it had not priced in an potential escalation of the war, said Kent Engelke, chief economic strategist at Capitol Securities Management.
“Talk about geopolitical angst returning,” Engelke said, later adding, “If there were really missiles shot to Poland and that was really not an accident, wow, that is really increasing the scope of the war.”
A U.S. National Security Council spokesperson said the agency was aware of the news reports out of Poland, but that it cannot confirm the reports or any details at this time.
While international worries clouded the session, there was also encouraging domestic news.
The U.S. producer-price index climbed 8% over the 12 months through October, the Labor Department said Tuesday, easing from September’s revised 8.4% increase. Last week, stocks surged after the October consumer-price index rose more slowly than expected.
Tuesday’s PPI report helped support the notion that inflation has peaked, at least for now.
“Today, it’s really about the PPI and the market reaction to it,” Steve Sosnick, chief strategist at Interactive Brokers IBKR, +3.45%,
said in a Tuesday morning interview before the reports of missiles crossing into Poland.
Markets ripped higher last Thursday after October’s consumer-price index showed signs of easing. The same dynamic was playing out Tuesday, but the response now has been “a bit more muted” because it’s an iteration on inflation data that investors already had been starting to see, Sosnick said.
So, is the economy really at peak inflation? It’s too early to say for sure, according to Sosnick. Still, the PPI numbers, paired with last week’s CPI reading “does add evidence to that narrative,” he added.
Walmart’s third quarter earnings also were buoying markets, Sosnick said. The massive retailer’s beat on earnings offers a glimpse at the minds and wallets of many American consumers. For anyone who worries about consumers “getting highly defensive” and not spending, Walmart’s numbers are “counter evidence.”
In other news, the first face-to-face meeting between President Joe Biden and President Xi Jinping helped support stocks listed in China and Hong Kong, as some of the tensions between the world’s two largest economies were seen to be easing.
Analysts increasingly expect stocks to enjoy a positive end to the year. “The near-term picture still looks positive for U.S. benchmark indices and while momentum has reached intra-day overbought levels, this doesn’t imply a selloff has to happen right away,” said Mark Newton, head of technical strategy at Fundstrat.
Philadelphia Federal Reserve President Patrick Harker said Tuesday that he favored a 50 basis-point hike to the Fed’s benchmark rate in December. Atlanta Fed President Raphael Bostic said more rate hikes will be needed, even through there have been “glimmers of hope” on inflation.
Fed Vice Chairman for Supervision Michael Barr said Tuesday that the U.S. economy is likely to slow in coming months, and more workers will lose their jobs, in Senate testimony. The Fed is working with regulators to assess risks tied to cryptocurrency markets, following the collapse of FTX and its associated companies.
In other U.S. economic data, the New York Empire State manufacturing index for November showed a gauge of manufacturing activity in the state rose 13.6 points to 4.5 this month.
The yield on the 10-year Treasury note TMUBMUSD10Y, 3.774%
was down 6.7 basis points at 3.798%. Bond yields move inversely to prices.
Companies in focus
Walmart WMT, +6.54%
shares jumped after the giant retailer swung to a net third-quarter loss, due to $3.3 billion in charges related to opioid legal settlements, but reported adjusted profit, revenue and same-store sales that were well above expectations and a full-year outlook that was above forecasts. Walmart shares opened Tuesday at $145.61 and closed at $147.48, or 6.57% higher.
Home Depot HD, +1.63%
rose after the home improvement retailer reported fiscal third-quarter earnings that beat expectations, citing strength in project-related categories, but kept its full-year outlook intact. Home Depot shares opened Tuesday at $304.06 and closed at $311.99.
Chinese-listed technology traded sharply higher on Tuesday, including U.S.-traded ADRs for Alibaba Group Holding BABA, +11.17%, Baidu Inc. BIDU, +9.02%
and JD.com Inc. JD, +7.14%
The KraneShares CSI China Internet exchange-traded fund KWEB, +9.56%
also traded substantially higher.
—Jamie Chisholm contributed reporting to this article
Shares of Chinese travel and consumer companies gained ground in Hong Kong after Beijing eased some Covid-19 restrictions, improving the outlook for sectors directly hit by the pandemic and the broader economic recovery.
In Friday afternoon trade, the Hang Seng China Enterprises Index 160462, +7.98%
advanced 7.6%, while the city’s benchmark Hang Seng Index HSI, +7.51%
jumped 7.1% to 17221.43, recovering to levels last seen a month ago. The benchmark index would mark its largest one-day gain since mid-March if it closes at current levels.
China’s three major airlines, Air China Ltd. 601111, -3.11%,
China Southern Airlines Co. 600029, +0.13%
and China Eastern Airlines Corp. 600115, +1.14%,
added between 2.2% and 5.1%, while travel retailer China Tourism Group Duty Free Corp. 601888, +3.65%
climbed 7.1%.
Broader consumer-related sectors also strengthened, amid hopes that less stringent rules could help revive consumption. E-commerce platforms Alibaba Group Holding Ltd. BABA, +7.60%
9618, +16.22%
jumped 11% and 16%, respectively, while restaurant operator Haidilao International Holding Ltd. 6862, +5.21%
climbed 4.7%.
China said Friday that it will shorten the quarantine period for close contacts of COVID cases and travelers to the country, among other policy tweaks. But the government also said it will stick to its zero-COVID policy.
Friday’s market upturn came on the back of U.S. stocks’ biggest rally in two years, after October inflation data was weaker than expected, lifting expectations of less aggressive interest-rate increases by the Federal Reserve.
The local Shanghai Composite SHCOMP, -2.02%
index fell a less dramatic 2%.
Over the weekend, the 69-year-old Xi secured his third term as general secretary of the Chinese Communist Party. Reporters captured video of former Chinese President Hu Jintao getting escorted out of the closing ceremony. Four of the seven standing committee members were replaced, all of whom are at least 60 years old.
Analysts at Goldman Sachs say most of the new appointees worked with Xi at earlier stages of their careers. “We note that incoming leaders could arguably be more focused on ideological and political subjects while the retiring policymakers appear more economy/market-oriented,” they said.
They added that for valuations to improve, more clarity on the zero COVID policy, stabilization of the property markets, and de-escalation of both cross-straits and U.S.-China tensions would be needed.
SHREVEPORT, La., September 9, 2019 (Newswire.com)
– Southland Printing Company, Inc. today announced that it has acquired substantially all the business assets of Digital Printing Systems, Inc., a leading provider of printed parking and transit products. Digital Printing Systems, founded in 1971 by Don Nores and based in Azusa, California, serves more than 500 customers in over 30 countries and is known for high-quality products and personalized customer service.
“It’s such an honor to be entrusted by the Nores family to continue building on the legacy of their business,” said John Manno, Jr., President and CEO of Southland Printing Company. “To assure a smooth transition, we will be offering employment to many of Digital’s key personnel and we will transfer their customers’ order history, pricing, artwork and dies to Southland. Southland, as a family owned and operated business, is dedicated to providing our customers, new and old, the best products, service and value.”
“This acquisition ensures that our customers will continue to receive exceptional service and quality U.S.-made products,” said Peter Young, Digital’s President. “Our shared family-business values align perfectly and we know we can rely on Southland’s continued commitment to the parking and transit customers we both have served for decades.”
With this acquisition, Southland Printing Company cements its position as the market leader in printed parking and transit products.
In the months to come, customers can continue to place orders directly with Digital Printing Systems and Southland Printing. As the companies work to consolidate the operations into Shreveport, Louisiana, customers and vendors will receive regular updates.
This transaction was facilitated by Strategic Growth, Inc., a private investment banker for the parking and event ticket markets. Southland was advised by Kean Miller LLP (legal advisor) and KPMG (financial and accounting advisor). Digital Printing Systems was advised by Hahn & Hahn, LLP (legal advisor) and Lucas Horsfall (accounting and tax advisor).
About Southland Printing Company, Inc.
Founded in 1960 by John Manno, Sr. and currently under the leadership of John Manno, Jr., Southland Printing Company, Inc. delivers high-quality printed parking and transit products that meet the ever-changing needs of its customers. This commitment is evident through Southland’s market leadership and strong customer relationships. With its broad range of print-based solutions, Southland is trusted by more than 1,000 organizations in the United States and abroad, including parking operators, transit authorities, municipalities, universities, hospitals, and airports. Southland Printing is headquartered in Shreveport, Louisiana. For additional information about Southland’s products and services, visit www.SouthlandPrinting.com.
About Digital Printing Systems, Inc.
Digital Printing Systems, Inc. was founded by Donald J. Nores in 1971. Since then, Digital, with the commitment of its owners, the Nores family, and under the leadership of its President, Peter Young, has grown to become a leader in printed products for the transit and parking markets. Headquartered in Azusa, California, Digital serves customers around the world. For additional information about Digital Printing Systems, visit www.DPStickets.com.
Contact: Jean Nixon Administrative Assistant to Mr. John Manno, Jr. Southland Printing Company, Inc. (318) 221-8662 jean@southlandprinting.com
